The advantages of variable loan with fixed loan security: focus on mixed loan, another mortgage solution.
What is a mixed rate mortgage?
The mixed loan is a home loan that benefits both the benefits of the fixed loan and those of the variable loan. The mixed loan is a loan to fixed rate over a first period reimbursement then to variable rate over a second period reimbursement. The credit repayment periods quoted are fixed at the time of signing the contract with the lending bank.
The floating rate is a revisable rate with maturities set in advance and usually capped. Capé means that a maximum interest rate is set in the event of a rise in market rates, just as a minimum rate is set in case of a decline.
Advantages and disadvantages of mixed loan
- The main advantage of mixed-rate real estate credit is that it is generally more attractiveand therefore cheaper, than a conventional fixed rate loan. Since the second part of repayment is variable rate, and thus riskier than a traditional fixed rate, the banks offer mixed loans whose basic interest rates are more attractive.
- The variable rate used is generally a revisable rate, whose deadlines were set at the signing of the contract, and whose rate is capped. You thus know in advance the maximum and minimum rates that will be exercised on the capital to be repaid. This principle of the cap rate allows a better visibility of repayment in the long term.
- At the end of the first maturity, when switching to a variable rate, you are often offered to choose between two possibilities: pass the rate variation over the repayment period, to lengthen or reduce it, or reflect this variation on the amount of monthly payments. This allows you to manage your mixed loan as you see fit (in agreement with the lending bank of course).
- Another advantage of the mixed loan is that the most beneficial solution is resell this mixed loan (to use a credit redemption) just before switching to the variable rate repayment period. You only enjoy the benefits of the mixed loan.
- Like the fixed rate loan, you will have to pay penalty fees in case of early repayment of the borrowed capital. In this respect, it is advisable to reduce the amount of these costs before signing the contract.
- The subsidized loan
- The loan relay
- The modular loan